In Santa's workshop in the North Pole, Santa's elves sing about Christmas nearing and Santa's absence. Meanwhile, on a beach in Florida, Santa's sleigh has become mired in the sand, and his reindeer have flown away to escape the heat, leaving him stuck. Santa sings a song bemoaning his troubles, then falls asleep.
Several local children hear Santa calling them telepathically and run to him. Santa awakes and explains his predicament. One boy asks why Santa does not fly back to the North Pole on a plane; he explains that he cannot abandon his sleigh and needs their help pulling it out of the sand. The kids bring him several animals, including a pig, a sheep, a donkey, a horse, and a gorilla.
When all the children's attempts fail, Santa encourages them not to give up hope, and tells them a story about a girl who visits the theme park Pirates World and hears the story of "Thumbelina" as an example. A previously produced film of Thumbelina directed by Barry Mahon plays, complete with the film's original credit sequence, and runs longer than its frame story. (Alternate prints of Santa and the Ice Cream Bunny use another Mahon adaptation, Jack in the Beanstalk, as Santa's story.)
After the story, Santa encourages the kids to "always believe". One girl tells Santa that her dog, Rebel, can do anything. The kids leave. Santa takes off his coat and falls asleep. He wakes up and puts his coat back on when the kids return in an antique fire engine, singing about how they will help Santa. The engine is being driven by the titular Ice Cream Bunny, whom Rebel has summoned. The bunny offers to drive Santa to the North Pole and they depart. The children realize Santa's sleigh is still stuck in the sand and wonder what to do before it teleports to the North Pole, waiting for Santa's arrival.